Friday, October 24, 2014

Q3 2014 Lobby Spend At Merck: $1.4075 Million -- Year To Date: $5.15 Million

Well, the pace is still running about one half of what it was last year.

But still a substantial amount -- with a great ROI, as the graphic at right would suggest. Almost no new matters on the lobbyists' agendas, for Whitehouse Station it would seem, this quarter -- except for a few new bills under consideration (bolded, below):

. . . .Alzheimer's education (no specific bill); 340B (no specific bill); National Diabetes Clinical Care Commission Act (H.R. 1074, S. 539); Diabetes Prevention & Treatment, including related provisions of HR 3322, The Eliminating Disparities in Diabetes Prevention, Access and Care Act of 2013 and HR 1074, The National Diabetes Clinical Care Commission Act; Hepatitis C education (no specific bill); adult vaccine policies (no specific bill); medication adherence (no specific bill); DISARM (H.R. 4187). . . .

Comprehensive tax reform (no specific bill); transfer pricing of intangibles (no specific bill); territorial tax system (no specific bill); deferral of taxation of foreign earned income (no specific bill); tax base erosion (no specific bill); R&D tax credit (no specific bill). . . .

Medicare Coverage and Reimbursement issues; Medicare access to DXA services, Medicare reimbursement for antimicrobial drugs, including related provisions in HR 4181, The Developing an Innovative Strategy for Antimicrobial Resistant Microorganisms Act of 2014). . . .

MODDERN Cures Act of 2013 (H.R. 3116), Prescription Drug User Fee Act (general planning), 21st Century Cures (no specific bill), Strengthening Medicare Anti-Fraud Measures Act of 2013 (H.R. 2925), Big data (general education), Alzheimer's education (no specific bill), biosimilars (general education, no specific bill), general pharmaceutical industry issues and education. . . .

Trans-Pacific Partnership (no specific bill); biologic data exclusivity (no specific bill); trade promotion authority (no specific bill); treatment of intellectual property in India (no specific bill); Playing Fair on Trade and Innovation Act (HR 3167); additives in beef cattle (no specific bill); trade adjustment assistance (no specific bill); international trade barriers for beta-agonists (no specific bill). . . .

Deficit reduction (no specific bill); ADAP funding (no specific bill); omnibus appropriations; Patent reform (H.R. 3309, S. 1720 ); education on beta agonists (no specific bill). . . .

There you have it. Have a safe & fun pumpkin patch weekend, one and all! I know I will. . . .

Wednesday, October 22, 2014

Second Circuit Panel Overturns Judge Keenan's Fine -- On Fosamax® ONJ Plaintiffs' Trial Attorney

Almost four years ago now -- after lawyers for Shirley Boles won an $8 million Fosamax® ONJ verdict (which was subsequently reduced, and settled) -- Judge John F. Keenan, sitting in Manhattan's federal District Courthouse, entered a sanctions order, reprimanding one of her lawyers, and fining him $2,500.

Judge Keenan held that the lawyer had violated several of the judge's prior orders, regarding allowable argument. That lawyer then appealed Judge Keenan's sanctions -- to the federal Second Circuit. In an opinion and order published this week, a three judge appellate panel overturned Judge Keenan, saying he hadn't made it clear enough that the lawyer's conduct went beyond zealous advocacy. So that lawyer will not have to pay the fine, and the note will be removed from his electronic jacket.

Below, I'll set out a bit of both sides' "shenanigans" (see Merck's crazy Powerpoint slide at right, in this regard) -- in Boles II. As we can see both sides got well out of hand, in the land of borderline advocacy -- and because the plaintiffs didn't seek sanctions against Merck's lawyers, Judge Keenan only explicitly considered plaintiffs counsel's conduct, in his sanctions order. Do go read these two background pieces -- from that time, here, and here. . . for the more fullsome story:

[As Judge Keenan himself wrote four years ago:]. . . .The Court in no way condones the [plaintiff counsel's]. . . conduct at trial. Nevertheless, viewing [plaintiff counsel's] behavior in the context of the trial as a whole, a new trial is not warranted. As the Court described above in denying Merck’s Rule 50 motion, Plaintiff introduced sufficient evidence to sustain a verdict. Although the Court disapproves of the manner in which [plaintiff counsel] delivered his summation, it cannot conclude that his unusual antics prejudiced Merck. The majority of questionable conduct raised by Merck and noted by the Court did not touch on the key evidence of the case. No matter how much counsel criticized the FDA’s ability to regulate drugs or mocked the defense witnesses’ courtroom demeanor, those comments had little impact on the fundamental questions the jury was called upon to answer, that is, whether the evidence showed that Fosamax’s risks outweigh its benefits and whether the drug caused Plaintiff to develop ONJ. . . . [And yet he sanctioned that plaintiff's lawyer, in a subsequent order.]

The Second Circuit, on appeal, reversed that outcome -- this week:

. . .[The remarks of plaintiffs' counsel] are not self-evidently improper, and the [District Court Judge John F. Keenan] did not expressly link these remarks with other behaviors or other factors that might bear upon the issue of bad faith. . . .

Now you know. Aggressive lawyering is not. . . necessarily improper or unethical lawyering. Additional background, here.

Monday, October 20, 2014

UPDATING: CapitalHill Advisory Corrects Its Lobbying Disclosure Form: It Is "Our" Merck!

Well, the newly-amended form LD-2 removes all reference to the German company's address, and cleans up the typos in what the lobbying is about.

The same lobbying firm represents others, including Pfizer and Astra-Zeneca and Abbvie on these issues, so the less than $5,000 paid by Whitehouse Station is truly tiny. Here it is, as corrected:

. . . .Australian Government policy on intellectual property and its impact on the Australian healthcare system. . . Impact of Australian Government Policy on the company's local business environment. . . .

Now you know. Glad we were able to clear that up.

Sunday, October 19, 2014

Very Little Is Actually New, In Merck's Propecia® MDL Litigation: Update, Per Anon. Commenters' Questions

An erstwhile but anonymous commenter has asked if much had happened in this finasteride/Proscar®/Propecia® federal MDL -- since the August 20, 2014 status hearing.

In a word. . . no. There is, however, an ongoing skirmish -- over how many attachments to its emails Merck may avoid disclosing -- to the plaintiffs' lawyers. The fight is over whether some, none or all of them are attorney client privileged communicaitons -- here's a bit of that last filing -- from October 9, 2014:

. . . .We [plaintiffs' lawyers] have reviewed Merck’s new privilege log. Of the 1,800 e-mails originally withheld but neither authored nor received by a lawyer, Merck has produced all but 162. Accordingly, Plaintiffs withdraw their challenge to the assertion of privilege on those 1,800 e-mails.

However, Merck claimed attorney-client privilege on 1,191 attachments. No lawyer authored 586 of those documents, although a lawyer received or was copied on some of them. Of the documents received by a lawyer, none appear to be requests for legal advice. We respectfully renew our challenge to those 586 documents being withheld as privileged (see attached challenge log).

We believe that an in camera inspection of between sixty and one hundred of those attachments is warranted to confirm or deny Merck’s assertions. . . .

SO. . . there is a quite long road ahead, yet here, I'm afraid (at least a long road until checks are cut by Merck -- if ever they are). Just for what it is worth.

Saturday, October 18, 2014

Kudos To Commenters!: Will Patent Judges Be Concerned That Merck Called Idenix Deal "Project Invincible"?

Of course, the notion of a large company buying smaller companies, whole -- in order to improve various aspects of the larger one's patent estate is by no means a novel concept. It has been going on for many decades now, especially in the life sciences sector. So Merck's purchase of Idenix is in many ways plain vanilla M&A.

Even so, this is what is wonderful about having an extremely well-versed, highly-expert, and soundly engaged readership, here: my anonymous helper(s) pointed out (on Thursday night) that the Whitehouse Station coined code-name for the project to acquire Idenix was. . . "Invincible".

That may well be understood in the patent courts here, and in the U.K., as a suggestion that Merck was seeking to lock in a monopoly position, in its bargaining with Gilead over the en-vivo metabolite patents it (and Idenix) hold. That in turn could be called "patent trolling" (a frowned upon practice), albeit on a titanic scale, not yet seen anywhere on the planet -- or, at least it could arguably seen that way. Idenix and Merck are asserting entitlements to 10 per cent of the world wide revenue from Sovaldi®. Sovaldi will likely book $6 billion in sales in this, its first year on market. Perhaps closer to $10 billion, next year. So, that 10 per cent could be worth $600 million to $1 billion a year to Merck, without having to supply any product (i.e., ramp any real ongoing expenses) -- the whole truckload of cash would be just essentially pure profit to Merck, once the legal fees were paid. A pure-play margin and cash-flow enhancer, company wide -- if ever there one was. And that's powerful business motivation.

Interestingly, Merck is on trial right now, in the United Kingdom, but traveling mostly incognito, under the name Idenix, as it litigates with Gilead over this U.K. patent estate (seeking a largely similar royalty). Here is that bit, from Friday, London time (via Financier Worldwide -- now be sure and do go read it all):

. . . .Last year, Idenix commenced a program of asserting its patent rights against Gilead, with infringement lawsuits filed in the US, then in France, Germany and the UK. The UK courts are well known as a venue for the speedy resolution of disputes. In particular, the English Patents Court will sometimes hear claims in relation to a granted patent well ahead of the courts of other countries, not least because an early decision can sometimes promote settlement between the litigating parties.

Idenix’s patent infringement claim in the UK court against Gilead started in early October, with the trial likely to last about three weeks and a decision likely to be made public in November 2014, or possibly in early December. A win by Idenix on the issue of patent infringement would entitle it to claim a significant chunk of royalties from the UK sales of Sovaldi, but such a win would be contingent upon Idenix’s patent surviving a validity challenge from Gilead, which is being aggressively pursued. This is a common tactic in patent litigation, for those accused of patent infringement. If the validity of the patent can be successfully challenged, i.e., if a challenger can prove that the patent monopoly should not have been granted, it may escape the consequences of a finding of infringement. . . .

Fascinatingly high stakes patent poker, on a truly global scale. Of course, we learned the code name via the SEC complaint filed about insider trading on the deal news (thanks go to Ed, Pharmalot!).

Often here it seems, some of the best information turns up. . . in unlikely government-supplied public sources. So it goes on a rainy Saturday. To be clear, taking normal action to enforce one's patents is not a monopoly law violation in any country. But jury-rigging the give and take (where Idenix, the smaller company here might have accepted a lower royalty). . . well, that at least might draw an arched eye-brow expression, from the various patent courts' able jurists. We shall see.

Friday, October 17, 2014

Very Odd New Lobbying Disclosure -- Australia for Merck? Or, Is This The GERMAN Merck?

While it lists Merck Sharp Dohme as the client, CapitalHill Advisory (Sydney, Australia) shows a client address at 26 Talavera Road, Macquarie Park in NSW, Australia (wherever that might be -- likely New South Wales, as a postal code, presumably). However, at the bottom of the LD-2 disclosure form dated September 1, 2014, one Ms. Cathy Duncan, the person responsible for filing the form, indicates that the client is controlled by a "foreign entity" -- one residing at Frankfurter Strabe 250, but calling it Merck Sharp & Dohme, 64293 Darmstadt, Germany.

As my regular readers are quite well-aware, that would be. . . no relation to Merck (US). So the Merck Sharp Dohme name might likewise be. . . a case of mistaken identity. Ironic that a lobbyist would not know for "which" Merck it was conducting lobbying efforts, in DC. To add a little more mystery to the pre-Halloween mix, the claimed services are listed as "confidential". Well, that just isn't possible under US law. So, the form goes on to recite an Australian reimbursement practice which the client (whomever that might turn out to be!) would like altered -- see below:

. . . .Privileged & Confidential: The Australian Government's policy of initiating court proceedings to recovered [sic] damages from innovative pharmaceutical companies in cases where patents covering pharmaceutical benefits scheme (PBS)- listed medicines have been found invalid following an initial grant of an interlocutory injunction which delayed the launch of generic products. . . .

All quite. . . puzzling, no? I suspect this is not "our" Merck, at all. But as I type this, the third quarter reports of lobbying activity are trickling in. So expect a Merck Q3 total and analysis, in a few more days, here. Onward! Have a blast this weekend, one and all! I will with my last college kiddo, home for a short visit!

Thursday, October 16, 2014

Merck Pays A "Waifish" $34 Million In Settled Whistleblower Suits -- Regarding Legacy Organon's Remeron® Marketing Tactics

I must note that this too is on Fred Hassan's tab, even if completely immaterial to big Merck, here in 2014. You see, it was Mr. Hassan who acquired Organon in 2007, and folded it into what was then called Schering-Plough. [He, along with Whitehouse Station's Richard Clark, then renamed that company as Merck & Co., in a largely vain effort to avoid a J&J walk-away on Remicade® and later, Simponi®. But you regular readers know that story, already.]

So, in a very real sense, his bad night in the bar, just keeps costing Merck more and more. Here is the Corporate Crime Reporter story -- and a bit:

. . . .Organon will pay $34 million to settle allegations that it underpaid rebates to state Medicaid programs, offered improper financial incentives to nursing home pharmacy companies, promoted its antidepressants for unapproved uses, and misrepresented its drug prices to New York’s Medicaid program.. . .

Have a great weekend away (if you can go) -- I know I will too!

Never Say Never. . . But. . . "Pfinished" Is Pfizer's Inversion (AstraZeneca) Gambit

With Abbvie pulling the plug on its $55 billion Shire inversion, it seems reasonable to infer that Pfizer's inversion ploy for Astra-Zeneca is also. . . dead.

Without the (formerly-available) inversion-driven tax rate savings, the deal makes no sense, for Pfizer.

I'd say this one won't revive. Anyone hoping for a November 26 surprise restart of talks. . . ought to just ladle up another helping of stuffing with turkey gravy, and relax. Pat your belly. Not happening.

Especially since Astra-Zeneca's immuno-oncology program made such a nice showing at ASCO in June -- AZ's independence looks assured, for three to five more years, in my humble opinion. Or, at least its independence from Ian Read.

Wednesday, October 15, 2014

Merck Sees Only Tepid Response -- To Its Euro Notes Tender Offer -- A Light Response

The results were in -- as of last night. And they are decidedly. . . anemic:

Principal Principal
CUSIP Amount Amount Aggregate Total
Title of Notes Number Outstanding Tendered and Accepted Consideration(1)
6.30% Debentures due 2026 589331AC1 $250,000,000 $96,923,000 $129,669,405
6.40% Debentures due 2028 589331AD9 $500,000,000 $173,493,000 $236,395,008
5.95% Debentures due 2028 589331AE7 $500,000,000 $142,255,000 $189,907,185
6.50% Senior Notes due 2033 806605AG6 $1,150,000,000 $432,389,000 $616,004,910
5.75% Notes due 2036 589331AM9 $500,000,000 $127,870,000 $171,679,328
5.76% Notes due 2037 58933NAL3 $112,947,000 $33,815,000 $44,687,537
6.55% Senior Notes due 2037 806605AH4 $1,000,000,000 $475,948,000 $678,701,055
5.85% Notes due 2039 589331AQ0 $750,000,000 $331,093,000 $445,642,073

This shows us that investors prefer the fatter coupons on the old notes, compared to the new ones. Citi and JP Morgan likely advised Merck of this probability. So, Merck may now run a mandatory redemption. We shall see.

Honestly, I haven't bothered to check the SEC filings -- to read and see whether/if the Noteholders may be forced into a redemption. But that would make sense, if Merck has that right. We will watch for it.

Even so, overall, none of this is material to Mothership Merck. Oh, and also, speaking of immaterialities -- it seems an ex-Merck financial analyst was inside-tipping a fellow college alum from Rutgers, on the Idenix acquisition. Or so sayeth the SEC. Immaterial.Onward!

Monday, October 13, 2014

Jefferies & Co. Drops Merck's 12 Month Target To $60 -- From $62

Here is the SeekMoney investment wire update -- the firm still has a "Hold" on Merck -- but the 12 month price target is down.

This latest move, by a firm that has followed Merck for ages (it would seem) -- really makes newcomer Deutsche Bank (and newcomer Guggenheim) look like a pair of outliers -- at $65. Oh. Right. Deutsche got something like $15 million of fees and swap transactions payments from the euro debt underwriting at Merck, as recently as last week.

. . . .down, from $62 to $60. . .

So it goes. It was ever thus, at Wall and Broad. Slow news weeks for Whitehouse Station. Disclaimer: I do believe both Guggenheim and Deutsche Bank are complying with SEC Reg AC, here. As (obviously) is Jefferies & Co. Onward.

Monday, October 6, 2014

"Told Ya'!", PART II -- Legacy S-P's Consumer Health Netted $6.9 $5.9 Billion: Merck's SEC Form 8-K Filing This Morning

Yesterday, I pointed out that Merck is paying "back" $1 billion to Bayer, in cash, in certain areas, post the close of the sale of the legacy Schering Plough Consumer Health businesses (on October 1, 2014). Today, we see the official net figure. And, just as I said. . . between $6 billion and $7 billion. see the early 2014 graphic, at right -- and this link.

Per the last line of the last page -- of Exhibit 99.2 to the Form 8-K:

. . . .Estimated gain net of taxes | $6.909 billion. . . .

So, from that $6.9 billion, we subtract the $1 billion cash payment. . . viola! right on $6 billion! And that's a very far cry -- from the $14.2 billion -- as widely-advertised.

"This Is How Wall St. Still Works" Dept.: I Told Ya' Deutsche Was Angling For Merck Debt Underwriting Roles

This morning, Merck announced what is essentially a debt swap -- buying back some of its higher coupon (around 6.3 per cent) debt, which will be replaced by an equal amount of new debt, which is indicated to price at around the relevant Treasury obligations (3 per cent), plus about 50 to 90 basis points, to reflect the increased default risk Merck presents, compared to the US Government's risk of default. Got it? Good. Simple finance.

That is sensible, and expected, as the outstanding (since 2009) Merck euro coupon debt is now unduly expensive, compared to presently prevailing interest rates (as I said above -- they are lower now, than they were back then). Very plain vanilla finance strategy is at work here.

What I enjoy, however, is "the story behind the story". Note that DeutscheBank, back in August (see my graphic at right, from August 2014) "jumped the couch" when it placed an equity price target on Merck -- at $65. That was a full two bucks over all others. What's a couple of bucks, you might ask? Well Merck has 2.88 billion shares outstanding, so that is. . . $5.8 billion, in implied increased enterprise value. And, such a couch jumping prediction (especially by a major house, on a Fortune 100 company) is -- more than occasionally -- a self fufilling prophecy. Note here that Guggenheim joined DeutscheBank -- just this past week, at the $65 target level. And since August, Merck has more or less risen steadily, from $56.80 to around $59 or $60 (occasionally to $61).

AND. . . SO, in a very real sense, the tout/analyst side of the Deutsche house was scratching Merck's back, in August. Now here in the first full week of October, the "debt side" of the Deutsche house will reap commissions on over $4.7 billion of new debt sales, for Whitehouse Station. Su--w-w-w-e-e-e-e-e-e-t. That could well be a $15 to $30 million payday, with all the resultant stabilizing trades -- and hedging activities, all in. Here's the plain vanilla press release, from Whitehouse Station this morning:

. . . .Merck. . . announced today the commencement of a public offering of three series of Euro denominated senior unsecured notes due 2021, 2026 and 2034 (collectively, the "New Notes"). The exact terms and timing of the offering will depend upon market conditions and other factors.

The Company intends to use all or a substantial portion of the net proceeds from the offering of the New Notes to purchase notes and debentures that are validly tendered in connection with tender offers launched by the Company for its 6.30% Debentures due 2026, 6.40% Debentures due 2028, 5.95% Debentures due 2028, 6.50% Senior Notes due 2033, 5.75% Notes due 2036, 5.76% Notes due 2037, 6.55% Senior Notes due 2037, and 5.85% Notes due 2039 (collectively, the “Old Notes”). As of the date of the Offer to Purchase, the aggregate outstanding principal amount of the Old Notes is approximately $4.76 billion. If there are net proceeds remaining after the tender offers, the Company intends to redeem in whole or in part, its 4.00% Notes due 2015 and 6.00% Senior Notes due 2017. Any remaining net proceeds will be used for general corporate purposes. . . .

And who is a co-lead underwriter on this deal? Deutsche. Hilarious. To be clear, I am certain that the Deutsche stock analysts are complying with their various SEC Reg AC duties. That is, they genuinely believe in the analysis they made (and the price target they set for the name), back in August. But it had an incidental benefit, here for the debt side of the house -- exactly as I said it might.

Sunday, October 5, 2014

Just As I Predicted, Merck Has Already Returned $1 Billion Of The Consumer Health Assets' Price, To Bayer, Post Close

As I repeatedly said much earlier, the "effective price" received by Merck is significantly smaller, than that widely reported and disclosed -- after all the ancillary "swapping" dust. . . has settled. There are many side deals, in which Bayer receives support in the US, including $1 billion in cash, in order to offset parts of the price Bayer paid -- for legacy Schering-Plough's Consumer Health assets. They just were not remotely worth $14 billion. Just not possible, in a rational world.

Take a look -- from the October 1, 2014 Whitehouse Station press release -- an exerpt:

. . . .Merck has also entered into the previously announced worldwide collaboration between the companies to develop and commercialize soluble guanylate cyclase (sGC) modulators. This collaboration, effective today, includes Bayer’s AdempasTM (riociguat), the first in a novel class of compounds and the only treatment approved for both pulmonary arterial hypertension (PAH) and chronic thromboembolic pulmonary hypertension (CTEPH), as well as the investigational compound vericiguat that is currently in Phase 2 development. The collaboration also includes opt-in rights for other early-stage sGC compounds in development by both companies. Merck will be making an upfront payment of $1 billion in connection with the sGC collaboration.

As previously communicated, the two companies will equally share certain costs and net sales for all products and candidates included in the collaboration, with additional milestone payments due upon the achievement of agreed-upon sales goals. For Adempas, Bayer will continue to lead commercialization in the Americas, while Merck will transition to lead commercialization in the rest of the world. In order to preserve business continuity in markets outside of the Americas where Adempas is launching, Bayer will continue to provide commercialization support on behalf of Merck for a period of time. . . .

We will keep you up to date, as other givebacks are announced, here.

Observation: Babies. . . are the Infinite's opinion that the World should go on. . .

The Delaware federal Merck (via Idenix) v. Gilead Patent Spat Is In. . . Mediation: My Own "Overlooked Material News" Dept.

I apologize. I am very late with this bit of courthouse news. And it is a potentially material bit (to Merck).

Back in early August, in the Delaware federal District Court in Wilmington, three days after Merck's acquisition of Idenix had closed, the East Coast version of the patent spat related to the human body metabolites of Sovaldi® was referred to mediation. Pretty shortly, we ought to start hearing about some potential outcomes of those mediation efforts. See order below, in blue pull-quote.

Do recall though, that on the West Coast, in San Jose, California federal District court many of the same patent claims are being litigated -- and no order regarding mediation exists (yet) there. There, on April 3, 2015, the able District Court judge will be asked to decide what the terms "administering," and "compound" mean, in the context of the two patents covering. . . the adminsistration of the compound, as a treatment for Hep C -- a treatment that becomes the metabolite(s) of Sovaldi, inside the human body.

And, as long as we are updating, here -- after the mediation order out east, Gilead has been completely successful in forcing Merck to get some new co-counsel -- in all of these various pieces of litigation (including in Europe and Japan). It turns out that one of the former Idenix law firms had previously represented Gilead in an at least arguably substantially related matter. And that, a judge might rule, cannot continue, in favor of Merck. So, all the parties agreed to let that counsel withdraw quietly. Specifically, the firm’s ". . .withdrawal from its representation of Idenix/Merck encompasse[d] the pending Delaware cases as well as any other sofosbuvir related litigation or work for Idenix/Merck world-wide" according to a September 14, 2014 letter filed in open court in Delaware.

In any event, here is the mediation order:

. . . .SO ORDERED, ON August 8, 2014

CASE REFERRED to Christopher J. Burke for Mediation. Associated Cases: 1:13-cv-01987-LPS, 1:14-cv-00109-LPS, 1:14-cv-00846-LPS-CJB(dlk). . . .

It remains to be seen whether there will be agreed royalty payments, from Gilead to Merck -- and if so, how much they will be -- but we will keep an eye on these various courthouses for news. This might, at least in the wilder dreams of Merck's counsel, run into tens of billions of dollars, in favor of Merck, over the lives of the affected patents. Now you know why it is being fought on both coasts, at once, and in the EU and Japan. Enjoy a hopefully sleepy Sunday, one and all.

Saturday, October 4, 2014

Guggenheim Initiates Coverage On Merck -- Joins Deutsche At Price Target Of $65; Neutral Rating

Time to sip the piping hot Saturday morning coffee, and fresh pulpy chilled orange juice. . . while I update where Whitehouse Station stands, in the eyes of the various and sundry Wall Street. . . touts.

Guggenheim (new to covering Merck) now co-leads the touts' pack, with the highest 12 month price target -- at $65. [To be fair, though, DeutscheBank claimed this high water mark, over a month ago.] Even so, it seems reasonably clear that most analysts believe Merck is essentially "fully valued," now trading on the NYSE at over 31 times its 2013 GAAP earnings per share. I agree. There may be a little upside yet this year in the name, but only a little.

In my experienced view, the single biggest catalyst (at October 4, 2014 -- looking forward 12 months) will be whether Merck's Keytruda®, or BMS's Opdivo® wins first approval in the "highest burden" cancers, in the US, and the EU (i.e., the deepest and widest markets). Thus the faded background images in the graphic at right. We continue to expect that will generally turn out to favor BMS (to the tune of an incremental perhaps $20 billion to $25 billion per year in peak sales) -- but Merck will still likely garner annual peak sales of perhaps $7 billion to $10 billion, even if it is the second one to market in these "biggest burden" cancers. Here is Thursday's Intercooler item -- I am late with it, as I have been busy on other. . . forest trails, this week's end. [Separately, Merck did close -- on the sale of the Consumer Health assets -- to Bayer.]

. . . .Several analysts have recently commented on the stock. Analysts at Guggenheim initiated coverage on shares of Merck & Co. in a research note on Thursday. They set a “neutral” rating and a $65.00 price target on the stock. Separately, analysts at Jefferies Group raised their price target on shares of Merck & Co. from $60.00 to $62.00 in a research note on Monday, September 15th. They now have a “hold” rating on the stock. Finally, analysts at BMO Capital Markets raised their price target on shares of Merck & Co. from $62.00 to $64.00 in a research note on Friday, September 5th. . . .

[In addition, the number of shares held short in Merck declined almost nine per cent in the first half of September, compared to end of August levels.] As of September 15th, there was short interest totalling 24,454,599 shares, a decline of 8.8% from the August 29th total of 26,803,576 shares. Approximately 0.8% of the shares of the company are short sold. Based on an average daily trading volume, of 8,434,560 shares, the days-to-cover ratio is currently 2.9 days. . . .

A trend line -- of decreasing shares shorted (sold today, to be bought back at some future date, at a presumably lower price) -- is almost always a bullish sign. We will keep an eye on it, to see whether it continues. Have a great Fall weekend, one and all.

Wednesday, October 1, 2014

Onglyza® (Saxagliptin) Claims/Cases To Be Separated From Larger Incretin Mimetics MDL -- Merck's Januvia®/Janumet®

If I had to guess, I 'd say that the reason the Onglyza® claims are being set to the side is that -- at least according to FDA -- post February 2014, there is some hint that elevated risks of cardiac events may be associated with saxagliptin, but not necessarily the other incretin mimetics. At least not yet. All are DPP-4 inhibitors, but only saxagliptin seems to be in the FDA's focus, on that score, post a New England Journal of Medicine report.

So it makes reasonably good sense to keep all the similar (pancreatitis) incretin mimetic claims in one place, and handle the alleged cardiac risk claims elsewhere -- for efficiency. From the motions, then:

. . . .On September 13, 2013, Plaintiff Teresa Seufert filed Seufert v. Merck Sharp & Dohme Corp., et al., Case No. 13-cv-2169 AJB (MDD). Although that complaint included claims against Merck Sharp & Dohme Corp. that fall within the scope of claims assigned to MDL No. 2452, it also included claims against AstraZeneca Pharmaceuticals LP and Bristol-Myers Squibb Company as to Onglyza. Plaintiffs subsequently filed Gaines, Lara, and McDaniel, which like Seufert, involved claims against the MDL Defendants that fall within the scope of claims assigned to MDL No. 2452 and also contained Onglyza claims. Onglyza claims were not part of the JPML Order creating MDL No. 2452. . . .

[Merck and the other] Defendants filed the Motion [to remand] on September 16, 2014. . . .

In the Motion, Defendants seek to separate the claims against Defendants from the Onglyza cases in which they are included as parties. . . . Plaintiffs do not. . . oppose this motion. . . .

So it will almost certainly be that the saxagliptin claims portions (a January 2011 backgrounder, under that link) of these cases, some of which allege elevated risks of cardiac related event side effects (claims not generally present in the MDL for incretin mimetics), will be left out of this main Southern California federal District MDL, by a subsequent order -- granting the motion. Enjoy your. . . hump day!

UPDATED: On October 3, 2014, an order granting the above separation of claims was entered. Now you know.

Tuesday, September 30, 2014

Roche, BMS And Merck Showing Good PD-1 Immuno Data -- In Bladder Cancer Too

Again out of Madrid -- and the big cancer confab -- the Anti-PD-1 immuno-oncology candidates look promising.

Separately, BMS is in a tight race on lung cancer (graphic at right, from ASCO back in June) with AZ's combo candidates (and AZ's candidate looks a little better on the side effect profile there). We will watch that one closely. Merck is running third there, at the moment -- and that is a massive burden cancer. Here's the bladder studies update bit:

. . . .Merck & Co's Keytruda and Roche's experimental antibody MPDL3280A have both achieved durable responses in patients with advanced bladder cancer, raising hopes of the first new therapy for the aggressive disease in more than 30 years. . . .

Data from early stage trials reported at the European Society of Medical Oncology (ESMO) conference in Madrid this week reveal that Keytruda (pembrolizumab) and MPDL3280A - both of which act on the programmed death-1 (PD1/PDL1) pathway - have encouraging activity in advanced urothelial cancer.

A phase Ib trial of Keytruda revealed that as a monotherapy the drug achieved a 24% overall response rate in patients with PDL1-positive tumours, with three of the 29 patients in the small study achieved a complete response. At the time of analysis, patients had shown responses of between 16 and 40-plus weeks. . . .

Very encouraging! And the big picture here is that we are taking major strides -- against largely intractable cancers. Heady stuff, indeed.

Sunday, September 28, 2014

Another Cancer Shows Good Responses -- To Merck's Keytruda® (Pembrolizumab/Lambrolizumab)

This morning, yet another cancer has shown solid response rates, on pembrolizumab, in a very small study.

And that is good news for Whitehouse Station. We all wait on the bigger burden cancers, to see which of BMS's Opdivo® or Merck's Keytruda® reaches market first, but in the mean time, this is immaterially good news. At this same European oncology conference in Madrid, Spain, Merck expects to show some data on five other types of cancers, in the coming week -- and some of that data might turn out to be material. We will watch for it. From a NASDAQ wire source, then:

. . . .The early findings presented showed an overall response rate of 31 percent with KEYTRUDA as monotherapy. In a small Phase I study involving 39 patients with PD-L1 positive, advanced stomach cancer, a total of 12 people showed tumor shrinkage after being given Keytruda. . . .

These data, from a cohort of the ongoing Phase 1b KEYNOTE-012 study, were presented today, as part of a late-breaking oral session, by Dr. Kei Muro, Aichi Cancer Center Hospital, Nagoya, Japan, at the European Society for Medical Oncology 2014 Congress in Madrid, Spain. Data investigating the use of KEYTRUDA monotherapy in five tumor types will be presented at ESMO 2014. . . .

It turns out that almost three quarters of all of these types of cases of stomach cancers appear in the developing world. And so, this won't likely be as lucrative a market franchise as some of the others, for immuno-oncology treatments. Which may help explain why this program is still in Phase I, while lung cancer is much futher along -- both at Merck, and at BMS. Enjoy the sunshine and cooler air. . . I will.

Saturday, September 27, 2014

ENHANCE Vytorin® Securities Litigation Claimants Should See Checks Before Christmas -- Thanks ($688 Million Worth!), Fred Hassan!

The sad thing is that a competent Chairman and CEO -- any competent one -- would have saved this $688 million, and might have avoided having to merge into Merck (under significant duress), altogether. [And, over $116 million in plaintiffs' attorneys' fees as well. Perhaps double that, in defense fees. Ugh.]

So in a very real sense, this $688 million is being taken from the Merck shareholders' pockets (and their insurers), due to the acts and omissions of the ex-Schering-Plough top six executives (Hassan, Cox, Sabatino and Saunders, et al.), and board of directors -- relative to the delays in releasing the (Vytorin®) ENHANCE study results.

Here's a bit of the latest motion for a dispositive order, from Friday:

. . . .PLEASE TAKE NOTICE that on October 20, 2014, at 10:00 a.m. or as soon thereafter as counsel may be heard, the undersigned counsel for Lead Plaintiffs shall move before the Hon. Esther Salas, U.S.D.J. at the Martin Luther King Building & U.S. Courthouse, 50 Walnut Street, Newark, New Jersey 07101 for entry of the accompanying Order Approving Distribution Plan, which will, inter alia:

. . .direct the distribution of the Net Settlement Fund to Claimants whose Claims have been accepted as valid and approved by the Court, while maintaining a Reserve for any contingencies that may arise; (iii) direct that distribution checks state that the check must be cashed within 90 days after the issue date; (iv) direct that Authorized Claimants will forfeit all recovery from the Settlement if they fail to cash their distribution checks in a timely manner; (v) adopt the recommended plan for any funds remaining following the Initial Distribution; (vi) release claims related to the claims administration process; (vii) approve Epiq’s fees and expenses incurred from October 1, 2013 through May 31, 2014, and to be incurred in connection with the initial distribution of the Net Settlement Fund; (viii) authorize the destruction of Proofs of Claim and supporting documents after the second distribution of the Net Settlement Fund; and (ix) provide that the Court retains jurisdiction to consider any further applications concerning the administration of the Settlement, and such other and further relief as the Court deems appropriate. . . .

We will let you know what comes of the October 20 hearing. But I would expect checks before Thanksgiving, even, this year.

Scheduling Miscellany -- Q3 2014 Results Call: Pre-Market Open, On October 27, 2014

It has been a very slow couple of weeks for Merck news -- at least the US Merck. The German one has announced a mega merger. But too many news outlets have confused the two. No -- this Merck & Co. has run sub-rosa for a bit.

So. . . its next big pre-scheduled event? The Q3 2014 earnings call, on the morning of October 27, 2014. On it, we may get a sense of the uptake on Keytruda® -- even if for only the last few days, in the quarter:

. . . .Merck will hold its third-quarter 2014 sales and earnings conference call with institutional investors and analysts at 8:00 a.m. EDT on Monday, Oct. 27. During the call, company executives will provide an overview of Merck’s performance for the quarter.

Investors, journalists and the general public may access a live audio webcast of the call on Merck’s website. . . .

We will tune in on that morning.